Many financial institutions in the Middle East are designing comprehensive ESG strategies that open the door to top-line growth, business opportunities, cost reductions, and regulatory compliance. 

According to a report by consulting firm Arthur D. Little, this growing trend demonstrates the momentum ESG is gathering in financial institutions as the World Bank increasingly emphasizes infusing ESG into business models. 

The UAE has witnessed a significant increase in green financing, reflective of a spurt in awareness of environmental, social, and governance (ESG) concerns among businesses and investors.

According to the report, the UAE witnessed a 32% growth in green and sustainable finance in 2022. This growth can be attributed to increasing ESG reporting across major public and private institutions in the country.

Financial institutions in the Middle East and North Africa (MENA) have adopted ESG as a key strategic element in their commitment to going green. Moreover, the MENA region generated $24.55 billion in sustainable finance in 2021, achieving a 532% year-on-year growth. 

Led by First Abu Dhabi Bank, Majid Al Futtaim’s fundraiser gathered$1.25 billion in 2022 as the credit facility linked to the company’s ESG goals. Further, Dubai Islamic Bank is currently in progress of concluding its own reporting on sustainable finance and investments.

As more reporting requirements become mandatory, financial institutions have responded by shifting their focus from defining an ESG strategy to implementing it, with data governance playing a crucial role.

“ESG has become the new normal for financial institutions. Green issuances from countries in the Middle East and North Africa are not standing still but are in fact outpacing global growth. 

Banks are finding that the complexity of ESG data has not been entirely captured and addressed by current data governance frameworks, leaving these banks to resort to ad hoc solutions for collecting, managing, and governing ESG data,” Andreas Buelow, Partner, Arthur D. Little, said in a statement.  

The report highlights the need for financial institutions to efficiently manage ESG information by setting up a governance framework to ensure quality control in a scalable, structured approach.